Multiple sources of funding driving growth of Indian start-ups

Indian start-ups have come a long way from a handful in 2005 to crossing the 3,000 mark already by the end of year 2014. A home to a new breed of young start-ups, the country has gradually evolved to become the fourth largest base of tech start-ups in the world. These new generation entrepreneurs are diving into high-value technology solutions, marking an era of hyper growth inflection point; with growth, capital and acquisitions all coming together creating a perfect storm.Multiple sources of funding driving growth of Indian start-ups

Start-ups funding is maturing significantly as venture capitalists across the world are shifting gears towards the Indian market, testing their fortunes with this vibrant community. More than 70 VCs/ investors have invested over USD 2 billion in aggregate within various start-up ventures in past 5 years.

Investment in the Start-ups community has grown by ~3.3X in 2014 as compared to the last year, with major thrust on funding avenues within growing eCommerce segment (with >50 per cent share in B2C focused VC deals). With the buzz created by the worlds of Alibaba and Flipkart, eCommerce is now considered as the preferred sector for VCs to bet high. Indian start-ups like Flipkart, InMobi, Uber and Snapdeal have already made their way towards the Billion Dollar Start-up Club with valuations at $1 billion or above.
Start-up Funding

The year 2014 witnessed a lots of interesting deals in the Start-ups space. While e-commerce marketplaces like Flipkart, Amazon, and Snapdeal cracked big ticket investments from global investors, niche start-ups like Urbanladder, Firstcry, PrettySecrets etc. had also managed to catch their sweet spot in the sun. Not just eCommerce, investment in service based portals (unlike physical goods) also picked up in 2014, with millions of funds invested across service portals like Uber, Ola, Quikr, Commonfloor, etc. to name a few.

An evolving ecosystem of VCs/ PEs/ Angels/ Incubators is accelerating the growth of Indian Start-ups to the next level. The amount of investment is gradually picking-up across stages (seed, early stage, growth and expansion) with a numbers of VCs now committing towards seed and early stage start-ups only. This has led to a growth of >2X in average VC/PE investment size for Start-ups with less than 2 years of tenure.

Many second generation entrepreneurs with large technology companies like Azim Premji (Wipro), Narayana Murthy (Infosys) etc., have started their venture fund to support the new age tech-entrepreneurs. Successful Indian business leaders are also betting high on the growing eCommerce market and the momentum has already picked up with four consecutive investments made by Mr. Ratan Tata in diverse base of start-ups including CarDekho, UrbanLadder, Bluestone and Snapdeal in less than a year.

At the same time, a variety of promised multi-billion dollar investments (e.g., SoftBank, Japan has pledged an investment of USD 10 billion in telecom and the fast-growing e-commerce sector) for the future are further testimony to India’s strength as an attractive destination, gaining access to multi-fold funding avenues. This concludes well to believe that the building blocks for the Indian technology start-ups have already placed, and will enable these young folks to hone their products and solutions to a global scale where they will not only satisfy existing needs, but drive new demand with their innovative products and offerings.

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